Annual Growth up 10.5% for Swansea's Rental Properties

Annual Growth up 10.5% for Swansea's Rental Properties

Welcome to Swansea Property News for July 2017.

Rightmove are reporting that Swansea is in the top 3 highest rental growth areas outside of Greater London, which is good news for landlords, though there are concerns about how this trend, among other factors, might be deepening the divide between homeowners and tenants not only in Swansea, but across the whole of the UK.

News earlier this month that Swansea will not be getting the long-promised electrified rail came as a blow, though on a more positive note, we are pleased to have made the final shortlist for City of Culture 2021.

Hannah McCartan, MD of McCartan Lettings

Annual Growth at 10.5% for Swansea's Rental Properties

It’s good news again for landlords and property investors in Swansea as Rightmove reports a 10.5% annual rise in Swansea rents.

Rightmove has published its quarterly Rental Trends Tracker for Q2 (April-June 2017), and names Swansea in the top 3 highest growth areas outside of Greater London between Q2 2016 and Q2 2017.

Across the UK, Rightmove also reports a 7% increase in available rental stock, so tenants should have more choice than this time last year. However, rents across the whole of the UK (apart from Greater London and the North East) have seen increases yet again over the past quarter, which suggests if supply isn't an issue then Landlords have started increasing rents.

Rents could be rising as the result of forward planning; landlords could be increasing rents ahead of higher taxes and the tenant fee ban coming into effect in England (which will most likely see agents passing some additional costs to landlords), or because they are starting to feel the pinch of the cost of licensing. It could also be that the values of rental properties are increasing as landlords invest back into their properties, improving the quality of the accommodation, and so commanding higher rent.

Hannah McCartan, MD of McCartan Lettings, comments, "The news that Swansea is still seeing a notable increase in rents into the first half of 2017 suggests that, despite what is happening in the rest of the UK, rental supply here is well below the demand that is out there, and when properties are presented to a high and desirable standard, tenants are willing and able to pay that bit extra."

Our stats for Swansea this month back up this trend as they also show that supply is considerably lower than last month, notably with 3 and 4 bedroom properties, and the difference between rents month on month are up on average 7.8% to the end of June 2017.

"Even with the challenges ahead for the buy-to-let market as a whole, Swansea is still looking like a strong area to invest in property with all the development potential it has, such as the City Regeneration Project, and hopefully with more in the pipeline too with the bid for City of Culture 2021 and The Tidal Lagoon”.

With careful planning for future tax implications, and taking advantage of the record low interest rates, investing in the right properties in Swansea where demand for long term professional tenancies is high should not only give healthy yields, but also capital growth.

If you are thinking of investing in property in Swansea, please get in touch to discuss your requirements and benefit from our wealth of knowledge on the property market in Swansea. Give our experienced team a call on 01792 430100, or email [email protected].

Source: Rightmove Rental Trends Tracker Q2 2017

Swansea in Race for City of Culture 2021

Yet another positive boost for Swansea as the city has made the final shortlist in the race to be named City of Culture 2021.

Hull is the current City of Culture, pipping Swansea to the post back in 2013.

Sunderland, Coventry, Paisley, and Stoke on Trent are the other finalists. The winner will be announced in December, and will benefit from &3 million Heritage Lottery Fund Grant.

Council Leader Rob Stewart said, “We are very excited to have passed this key milestone in achieving the status of UK City of Culture 2021 and I want to thank everyone in the Swansea community who has already taken this important campaign to their heart.

“This stage in the competition is tough, but the benefits of winning belong to us all so I would urge everyone to get behind Swansea’s campaign and show the assessors that we are ready to deliver this.

“We want every single person in Swansea to be a part of this process and to gain from it. This is our city, we are ‘Team Swansea’, so please look out for our Swansea 2021 campaign over the coming weeks and months and do all you can to get behind it.

“You only have to look at what the UK City of Culture 2017 has done for Hull to see how valuable this initiative is.

“The city, its people and its cultural offering have been put on the map, they have created some head-turning cultural events and projects, and it is estimated that the value of investment in their programmes and in their city centre comes in at more than &100m in funding from bodies like the Arts Council and the National Lottery and from private businesses based in and investing in the city.”

1.4 million visits to Hull have been recorded so far this year.

If Swansea were to win the deal, it would mean millions of pounds pouring into the city with new infrastructure works.

More than &30 million is being spent on the year’s events in Hull, and &25 million has been invested in revamping the city centre and refurbishing its Ferens Art Gallery and the city’s main theatre.

Now it has made the shortlist, Swansea’s UK City of Culture 2021 team will work towards their final bid.

Sources: Swansea Bay Futures / BBC/Gov.UK / Swansea 2021 / Hull 2017/ Visit Swansea Bay

Deepening Divide between Homeowners and Tenants

The average house price here in Wales has reached an all time high of &174,319, deepening the divide between homeowners and tenants as tenants say farewell to pay growth and expend on higher rents.

The UK’s obsession with house prices is a troubling one. Homeowners are keen to hear their property has increased in value, but the conflict arises with the lack of affordability within the first time buyer market over the last 10 years. The BBC reports that average weekly earnings are still 11% lower than they were at their peak in 2008, and actually fell 0.4% in the first quarter of 2017, yet house prices are at their highest since the crash.

Stephen Clark, an economic analyst from the think-tank The Resolution Foundation, says “four per cent of the workforce are experiencing shrinking pay packets according to the latest figures, in sectors ranging from finance to the public sector.

Many more will join them in the coming months as inflation continues to rise, with pay across the economy as a whole set to have fallen in the first three months of 2017.”

Gap between house prices and wages set to be 75% by 2020

Research undertaken by online agent Emoov found that since the introduction of 1% cap on public sector wages in 2012, public sector employees wages have grown by just 6.03%, while the average UK house price based on Land Registry data has increased by &50,000 – 31.12%.

In 2012, the average house price was &167,854, but the average public sector salary was just &25,060.

With a mortgage lender typically lending 4.5 times this wage and a 10% deposit of &16,785, a public sector employee could only afford to buy a property at a value of &129,556 – a difference of 29.56% between that and the average house price, the research shows.

Average Swansea wage &24,481

Since 2012, the gap has continued to widen, increasing by 29.59% in 2013, 37.27% in 2014, 41.61% in 2015, and 49.45% in 2016. So far, 2017 has seen the largest gap emerge at 55.46%, with the average house price topping &220,094, yet the average public sector wage has continued to stagnate at &26,571.

As a result, a public sector employee today can only secure a mortgage for a property valued at &141,579 (including the 10% deposit of &22,009), according to the research.

If it continues at this rate, the gap will be even worse by 2020, when the cap is due to end. Based on the last three years of both house price and public sector wage growth, the average house price could be in the region of &263,940, with the public sector wage reaching just &27,581. If this were the case, public sector employees would only be able to secure a mortgage on a property to the value of &150,507 with a 10% deposit of &26,394, a gap of 75.37%.

Inflation – is Brexit to blame?

Mark Carney, Governor of the Bank of England – “Brexit is likely to make people poorer”.

When prices rise faster than wages, spending power falls. Whilst the past few years have seen low inflation, it has been boosted by Brexit, and is set to increase further thanks to the rising price of imports and the falling value of the pound. This could be an indicator of how Brexit could continue to affect the housing market indirectly as the trend of house price growth and less in people’s pockets is set to continue.

And this trend is worrying – as lack of supply, increasing landlord costs, and rising inflation cause rents to rise, tenants will feel the squeeze, and they’ll be less able to borrow money as mortgage restrictions are also being tightened. Until wages start to increase, less people will be able to afford the ‘average property’, and ‘affordable housing’ will quickly become unaffordable. Rent increases will hit a ceiling as affordability for rents becomes an issue, too.

If tenants cant afford to buy, this reduces demand for house purchases. The Halifax reports that house price growth is at a 4 year low as buyer demand weakens, but unless house prices come down significantly, or wages increase significantly, the forecast for home-ownership is bleak.

Sources: Zoopla / Property Industry Eye on Low Demand / Property Industry Eye on Price and Wage Gap/ Property Wire / BBC on Pay Growth / BBC on Carney

Buy-to-Let Deal of the Month

Our buy to let deal of the month for July was so popular, by the time we were ready to send out this newsletter, the agent had already removed the listing, suggesting it has sold!

This month, I came across this really well-presented 3 bedroom family home in Manselton, which was on the market for &125,000. Manselton is a firm favourite with renters due to its proximity to the city centre, and it is central to all the main arteries out to the M4, from J47 to J42.

Internally, this property would require little by way of maintenance apart from the usual refresh (check out our top ten tips for presenting to your property by clicking here), so the void period between buying and getting it let would be minimal – with careful planning, even as little as just a week.

Properties in Manselton

3 bedroom properties in Manselton range from &550pcm - &650pcm, so at &600pcm and a purchase price of &125,000, it would bring in a healthy yield of 5.76%. According to data provided by Zoopla, there are no 3 bedroom properties available for rent in the area* - an indicator that demand will be high for this type of property, and that when 3 bedroom properties are let in the area, the tenants tend to stay long term.

I suspect that because there is an open house viewing on 29^th July and the asking price is right on the cusp of the stamp duty threshold that the vendor is motivated to sell. It would have been worth viewing, in my opinion, as I would have expected it to be sold on the open house day. As it is, it would appear it’s been snapped up even sooner than that!

What is an Open House Day?

When agents advertise an Open House Day, it’s basically a block viewing for anyone who wants to view it. The benefit for the agent and the seller is that all the viewings take place in one go, and of course it stirs up rivalry between the people viewing, making it more likely that the property will be sold on the day for the asking price or higher if bids are made.

As a purchaser, it would be better to secure a private, individual viewing beforehand so not to be swayed by the other people viewing the house at the same time. However, if that’s not possible, keep in mind your needs and wants from a property purchase when you arrive for the open house, and focus on what the property really has to offer and also what its limitations could be.

Since beginning to write this article, we suspect a keen purchaser managed to view early. Acting quickly is crucial when you see properties that are below market value if you are going to have the best chance to maximize your return on your property investment.

I hope this article has been some food for thought for you, and that it helps you think about the questions to ask and things to look for when looking at property to buy to let in Swansea.

If you have a property in mind already and would like my opinion on it (for free!), please just drop me an email with the brochure attached and I’d be more than happy to help. You can send them through to me at [email protected]

*correct as of 21/07/17

Swansea in Stats

Following on from my article regarding Swansea being named in the top 3 highest growth areas between Q2 2016 and 2017, here are the rental statistics from Zoopla for this month.

As you can see - and in line with the trend Rightmove reported -, rents in most areas have increased in the last month, though supply has decreased across all property sizes bar two.

Average Asking Rents in Swansea for July 2017

Percentage Difference in Average Asking Rents between June and July 2017

Number of Properties Available in July 2017

Percentage Difference in Number of Properties Available between June and July 2017

Source: Zoopla Area Guide for Swansea

Property of the Month

My Property of the Month for July is a modernised one bedroom ground floor apartment in the popular location of Sketty. Within walking distance of the University and Singleton Hospital, and only a short car ride from Swansea City Centre, it would be ideal for a professional single or couple.

It’s available from 4^th August, and the rent is &550pcm. It is available unfurnished.

Internally, the apartment comprises entrance leading to modern fitted kitchen with integrated appliances, large master bedroom with built-in wardrobes, modern bathroom with shower over bath, and large lounge diner.

Externally, there is a communal garden and allocated parking.

You can take a look at the brochure on our website by clicking here. Early viewing highly recommended!